The cost of health care has made health insurance a critical necessity for most families. In an intact family, generally at least one spouse will have health insurance coverage provided as an employment benefit that covers the entire family. However, upon divorce, the non-employee spouse may no longer qualify for continued coverage under the employee spouse´s health insurance because of the loss of dependent status. Fortunately, there are ways for the spouse without a health care benefit to continue health care coverage after divorce.
Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA [U.S.C. §1161(b)]), a spouse who might otherwise lose health insurance coverage because of divorce may have the option to continue coverage under the employee spouse´s group health plan. In essence, COBRA requires employers with twenty or more employees to offer continuing health insurance coverage upon certain “qualifying events” which would otherwise result in the loss of coverage. Under COBRA, a divorce or legal separation is a qualifying event and permits the non-employee spouse to continue health care coverage. COBRA applies to private sector health care plans and those sponsored by state and local governments. COBRA does not apply to plans sponsored by the Federal government. In order to be eligible for coverage under COBRA, one must be a “qualified beneficiary,” which is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee’s spouse, or the employee’s dependent child. A qualified beneficiary must be offered coverage identical to that available to similarly situated beneficiaries who are not receiving COBRA coverage under the plan. Thus, a qualified beneficiary can generally expect the same coverage that he or she had immediately before qualifying for COBRA coverage. Additionally, qualified beneficiaries must be allowed to make the same choices given to non-COBRA beneficiaries under the plan, such as during periods of open enrollment by the plan.
Upon a divorce or legal separation, the covered employee or qualified beneficiary is responsible for notifying the plan administrator of the qualifying event within sixty days of the divorce or legal separation. If neither party provides such notice, COBRA rights could be permanently lost. If a qualified beneficiary waives COBRA coverage during the election period, he or she may revoke the waiver of coverage before the end of the election period and then elect COBRA coverage. Once elected, COBRA coverage is retroactive to the date of the qualifying event. The covered employee’s spouse and the parties’ children are separate qualified beneficiaries under COBRA. Each qualified beneficiary may independently elect COBRA coverage. However, a covered employee or a covered employee’s spouse may elect COBRA coverage on behalf of a minor child.
Under COBRA, a qualified beneficiary is entitled to a maximum of thirty-six months of coverage. However, COBRA does not prohibit plans from offering continuation of health coverage that goes beyond the COBRA period. Additionally, some health care plans allow participants to convert group health coverage to an individual policy. If this option is available under the plan, then the qualified beneficiary has the same right to exercise the option at the end of the COBRA period.
Group health care coverage for COBRA participants is usually more expensive than coverage for employees. Typically, an employer pays a part of the premium for its employees, while COBRA participants may be required to pay the entire premium themselves. The premium cannot exceed 102% of the cost to the plan for non-COBRA participants, which includes both the portion paid by the employees and any portion paid by the employer. COBRA premiums may be increased if the cost to the plan increases, but generally must be fixed in advance of each twelve-month premium cycle. The plan must allow for payment of premiums on a monthly basis. While covered, COBRA beneficiaries are subject to the standard rules of the plan, and therefore are required to satisfy all costs related to co-payments and deductibles and are subject to standard benefit limits.
Federal Employees Health Benefits
The spouse of a Federal employee has special rights to continue health benefits after divorce under the Federal Employees Health Benefits program (FEHB). Initially, there is an automatic thirty-one day extension of coverage after the loss of entitlement to health benefits. Thereafter, there are two basic options available to the spouse under FEHB.
The first is Temporary Continuation of Coverage (TCC), which is the equivalent of COBRA coverage for former spouses of Federal employees. TCC provides continued coverage under the employee spouse’s health plan for up to thirty-six months after the judgment of divorce. The election of TCC is made by first notifying the employment office of the agency where the federal employee worked at the time of the divorce within sixty days from the date of divorce. The agency will then notify the former spouse about TCC benefits. The former spouse must elect TCC within sixty days of the later of the date of divorce or the date of receiving notice of TCC rights. Those enrolled in TCC are not limited to the plan in which they were covered at the time of the divorce. Once eligible for TCC, one can enroll in any plan for which otherwise qualified. TCC takes effect on the day that the initial thirty-one day extension of coverage ends and is retroactive to that date even where the enrollment process is not completed during the period of the initial extension of benefits. The former spouse is responsible for both the employee’s and the government’s shares of the premium for the health care program, plus an administrative charge of two percent of the total premium.
A more permanent option is available to former spouses of Federal employees if they meet the “spouse equity” requirements for FEHB coverage. A former spouse who qualifies for spouse equity coverage may enroll for coverage in his or her own right, as if he or she were a Federal employee. The spouse equity benefits are available to a former spouse which:
- Was covered as a family member under the employee’s FEHB enrollment for at least one day during the eighteen months prior to divorce
- Is entitled to receive a portion of the employee spouse’s retirement annuity
An application for spouse equity coverage must be submitted to the agency employment office where the federal employee worked at the time of the divorce within sixty days after the judgment of divorce. Part of the application process requires that the former spouse obtained a determination by the Federal retirement system that he or she is eligible for a portion of the employee spouse’s retirement annuity. Spouse equity coverage terminates if the former spouse remarries prior to age fifty-five. Upon termination of spouse equity coverage, a former spouse may enroll for TCC benefits. The former spouse who qualifies for spouse equity coverage is not required to remain in the same plan in which he or she was enrolled at the time of the divorce. There are several benefit options available under spouse equity coverage.
Plan information and relevant costs can be found at the Office of Personnel Management web site, www.opm.gov/insure.